Co-payments: New Rule May Promote Competition for Patients

Today, calculating Medicare co-payments is very easy. The hospital sends the patient a bill for 20 percent of the facility charge, and thats it. But on July 1, everything will change.

After ambulatory payment classifications (APCs) take effect, the co-payment will be based on the Medicare allowable payment, not the facility charge, according to Jack Turner, MD, PHD, FACEP, medical director for documentation compliance at Team Health, an emergency room staffing firm in Knoxville, Tenn. The facility can charge what it wants and needs, but sometimes that charge will bear little relationship to what Medicare will pay under the new system.

Medicare has estimated that beneficiaries are paying $75 million a month in excessive co-payments, says Mason Smith, MD, FACEP, president and chief executive officer of Lynx Medical Systems, a coding and documentation consulting business in Bellevue, Wash. The new outpatient prospective payment system will fix that.

What Patients Must Pay

Under the new APC regulations, facilities are required to bill at least 20 percent of the Medicare reimbursement, but they also can choose to bill patients a Medicare-calculated co-payment equal to roughly 20 percent of their average charge for the service regardless of what Medicare pays. Over time, that billing flexibility will disappear.

APCs are going to make it much more difficult for the hospitals to calculate the co-payment, Turner said. Then, eventually, all facility co-payments are going to have to be restricted to 20 percent of the Medicare allowable. Thats what eventually will happen; thats the ultimate goal of APCs for co-payments.

The difference in co-payment between 20 percent of Medicare allowable and 20 percent of the facility charge could be substantial, Smith says. For example, a facility may charge $3000 for a day surgery procedure, and the traditional Medicare co-pay is $600. If APCs allow only $1,000 for this service, the minimum co-payment would be $200. That $400 difference between the minimum and maximum patient bill leaves hospitals with a lot of wiggle room.

The average difference between the minimum and maximum will probably be somewhere between $150 and $350, depending on the medical group and payment amount, Smith claims.
The new co-payment rules allow hospitals considerable latitude in charging patients for medical care. The Health Care Financing Administration (HCFA) could have mandated that hospitals charge patients 20 percent of the institutions reimbursement immediately, but the administration opted to phase in the changes, Turner explains.

Price Competition

On the surface, the ability to charge more than 20 percent of the Medicare allowable sounds like good news for the hospitals. Medicare calculated the maximum co-payment based on a national medial amount. But some of the calculated co-payment amounts are greater than what Medicare wants them to be in the future, Turner says.

Hospitals, as noted above, [...]

- Published on 2000-06-01